Crypto lender BlockFi filed for bankruptcy in New Jersey following fallout from the collapse and ongoing bankruptcy proceedings of crypto exchange FTX. In its filings, the lender pointed to its “substantial exposure” to FTX which created a liquidity crisis.
BlockFi said the liquidity crisis was due to its exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX, as well as cryptocurrencies held on FTX’s platform that became trapped there. BlockFi listed its assets and liabilities as being between $1 billion and $10 billion.
“Although the debtors’ exposure to FTX is a major cause of this bankruptcy filing, the debtors do not face the myriad issues apparently facing FTX,” said the bankruptcy filing by Mark Renzi, managing director at Berkeley Research Group, the proposed financial advisor for BlockFi.
“Since the pause, our team has explored every strategic option and alternative available to us and has remained laser-focused on our primary objective of doing the best we can for our clients,” BlockFi said in a statement posted to its website. “These Chapter 11 cases will enable BlockFi to stabilize the business and provide BlockFi with the opportunity to consummate a reorganization plan that maximizes value for all stakeholders, including our valued clients.
“Rest assured, we will continue to work on recovering all obligations owed to BlockFi as promptly as practicable.”
Treasury Secretary Janet Yellen made a public statement on the recent failures in the crypto market, calling for more effective oversight of the cryptocurrency markets.
“We have very strong investor and consumer protection laws for most of our financial products and markets that are designed to address these risks,” Yellen said in the statement. “Where existing regulations apply, they must be enforced rigorously so that the same protections and principles apply to crypto assets and services. The federal government, including Congress, also needs to move quickly to fill the regulatory gaps the Biden Administration has identified.”